(via FreeRange Cycles in Seattle)
Of course the smaller versions of the San Marcos are designed for 650b, however the larger frames have a lower bottom bracket, which can cause issue when moving to a smaller wheel size. There is another option though.
While less talked about these days, 650a also know as 26x1 3/8" can be used to give your 700c SM a little more cush. 650a is nominally halfway between a 700c and a 650b size rims. There are actually quite a few good tires still available in this size from Michelin, Kenda Schwalbe and others, but the absolute best option IMO is the Panaracer Col De La Vie 650a. It's essentially the same as the 650b version, but fits on a 590 ISO rims.
There aren't as many good rims choices, but there are a few. The Sun Cr-18 is the most common, but there's are also the Araya SP-30 and the Velocity Synergy (not currently in production but NOS rims are out there).
This is great news for anybody with a Nottingham Raleigh Three Speed or a classic Japanese Randonneur that's built for 650a rims, but also for anybody looking to retrofit a bike with longer axle to brake bolt measurement such as the San Marcos or bikes made for 27" wheels. Most of the brakes that work for 650b conversions should also work with this trick. My favorite options are the Rivendell Silver dual pivots and the Dia Compe 750 center pull calipers.
(Now available with recessed hardware and upgraded brake pads)
If for some reason that won't work on your frame, there's always the option of Sturmey Archer drum brakes. More info about those can be found here www.sturmey-archer.com/products/hubs.
If your local bike mechanic gives you a weird look when you ask about this stuff, just point them to our distributor in San Francisco and they should be able to help out.
It looks like there's also a Flickr groups dedicated to this tire size now.
Check it out here http://www.flickr.com/groups/653369@N21/pool/